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Mutual microinsurance improves disaster resilience in vulnerable communities, finds report

25th June 2019 - Author: Matt Sheehan

A new study from the University of Cambridge Institute for Sustainability Leadership (CISL) has concluded that the use of mutual microinsurance contributes significantly to the recovery of low-income households following a natural disaster.

Aftermath of 2013’s Typhoon Haiyan in the Philippines. Source: EPA

Taking the impact of the 2013 Typhoon Haiyan in the Philippines as its case study, the report found that households covered by life insurance delivered by a mutual microinsurer recovered better after the disaster than those without.

Coverage for this event was provided by CARD Mutual Benefit Association (MBA), the world’s largest mutual microinsurance provider.

In many developing and emerging economies, mutual insurers are not recognised legally, hampering their ability to function optimally and to support those most in need of their products.

Despite the fact that the mutual insurance sector is estimated to hold 27% of the global insurance market, there has so far been very little independent research into the viability of mutual microsinsurance as a business model and its value in improving the resilience of communities.

In response to the findings, CISL has recommended that governmnents work towards aligning policy on inclusive insurance more closely with national and international targets, such as the United Nations Sustainable Development Goals (SDGs).

Additionally, the Institute said that the insurance sector (both mutual and non-mutual) must deliver better solutions for low-income populations, working with communities and regulators to understand and shape individual country needs.

“The CISL report demonstrates that mutual microinsurance has a unique role in delivering the SDGs,” said Sabbir Patel, Senior Vice-President, Emerging Markets at the International Cooperative and Mutual Insurance Federation (ICMIF).

“In addition to simply providing insurance, mutuals have led the way for centuries in taking a holistic, risk management approach driven by the people they were established to serve,” he contined. “The ICMIF 5-5-5 Mutual Microinsurance Strategy is one of the ways we are providing support to other mutual microinsurers to help replicate the commendable success achieved by CARD MBA in the Philippines.”

Philippe de Longueville, Member of the Executive Committee at Belgium cooperative insurer, P&V and Chair of ICMIF’s Development Committee, also endorsed the report: “We are proud to have supported this important work done by CISL and are grateful for the transparency and cooperation provided by CARD MBA in participating as the case study.

“The report confirms that mutual microinsurance plays a significant role in building resilience in low-income communities prior to and in the aftermath of natural disasters,” he said. “We welcome further dialogue to explore ways of increasing the impact of such schemes and building similar inclusive enabling environments in other jurisdictions.”

ICMIF CEO Shaun Tarbuck added: “This report also reinforces ICMIF’s belief that legislative system should take an inclusive approach which will allow mutual insurance to flourish side by side with commercial insurers.

“The Philippines case study demonstrates how this can be achieved and how it would lead to an increase in the insurance sector’s impact on economic development, poverty reduction and disaster recovery for the underserved population.”

Finally, Jake Reynolds, Executive Director of Sustainability Economy at CISL, commented: “The need for adaptation and resilience in the face of climate change is urgent, as are the messages in this research.”

“Until uncertainties surrounding the regulation of mutual microinsurance are addressed, the scope, scale and effectiveness of interventions by governments, donors and international institutions will continue to be hampered,” he explained. “It is time for insurers and policymakers to investigate this area further in order to understand how they can expedite delivery of the SDGs.”

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